SaaS BI vendor LucidEra’s demise harkens to ASP downfalls

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When my inbox began filling up with all the theories of why BI SaaS vendor LucidEra is expected to close down by month’s end, I couldn’t help thinking that the more things change (in name, at least), the more they stay the same.

LucidEra is in part a victim of a down economy, just as application service providers (ASPs) were in the late ’90s/early 2000s when the dot-com bust happened and VC funding started to dry up.

Like ASPs USinternetworking and Corio, LucidEra was one of the first to the SaaS BI parade. It had to lay new ground in many ways: The Web technologies that today’s SaaS vendors tap into weren’t around when LucidEra got started, so the company had a bigger learning curve and had to do lot of the development itself.

LucidEra told ThinkStrategies’ Jeff Kaplan that newer kids on the block learned from LucidEra’s mistakes and could skip many of the development cycles and bumps in the road that the company had to go through.

Back when next-generation ASPs such as Salesforce.com were getting started, they certainly didn’t try to go out and buy large data centers to essentially foot the infrastructure bill for enterprise customers, or try to retrofit Oracle’s or SAP’s licensing model to fit a multi-tenant one like first-generation ASPs had.

No, they, and other ASPs — now called SaaS vendors — learned from the mistakes of first-to-market ASPs like USinternetworking (USi), now part of IBM, and Corio, also now part of IBM.

USi and Corio came out the other side, but there are others that simply disappeared. Like ASP FutureLink, a company that many, including Microsoft — which sank $10 million into it — had high hopes for.

But all the buzz around so many of these players didn’t bring in enough customers to support them all.

Similarly, today there is a lot of interest in business intelligence and in the SaaS model. But is there enough interest to support all of the SaaS BI vendors?

Economy and customer adoption aside, LucidEra had a unique set of circumstances, including hooking its wagon to Salesforce.com. It is always risky to ride the coattails of another company, as USinternetworking and Corio found out by relying so heavily on Oracle and SAP.

And LucidEra did choose a niche in sales analytics. “One problem that [LucidEra] ran into was that not a lot of Salesforce.com customers saw the value-add of what they had to offer,” Kaplan said. “And to a greater extent, a lot of folks today think having analytics is a luxury they can do without.”

Some competitors believe that LucidEra’s downfall was its older code, developed in the late 1990s by Broadbase Software, the argument being that such code was not designed for the SaaS model. “I believe that it is difficult to retrofit a SaaS approach to an existing architecture and, unless designed as a SaaS application – multi-tenant, SOA, layered architecture than can scale horizontally – cost-effectively scaling the solution is incredibly hard,” said Wayne Morris, CEO of SaaS business intelligence vendor myDials. Morris expands on what went wrong at LucidEra on his company’s blog post.

Meanwhile, Brad Peters, CEO of SaaS business intelligence vendor Birst, chalks up LucidEra’s expected shutdown to the company’s standalone analytic software approach, as opposed to most companies’ need to analyze data from multiple sources, something that LucidEra’s software wasn’t set up for, he said.

All in all, the comments I’ve seen on blogs say this is not a sign of the on-demand model’s going away — not by a long shot — but a demise that happens naturally when a lot of companies crop up in one space. There are bound to be some that just don’t cross the chasm, as Geoffrey Moore would say.

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